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December 23, 2014

NEW: NCUA sues Wells Fargo as trustee of mortgage-backed securities

ALEXANDRIA, Va. (12/23/14, UPDATED 12:45 p.m. ET)--The National Credit Union Administration has filed a lawsuit suit in federal court against Wells Fargo Bank National Association, alleging the bank has failed to fulfill its duties as trustee for 27 residential mortgage-backed securities trusts.

The agency is suing in its capacity as liquidating agent for five failed corporate credit unions.

"Like other trustees against whom NCUA is pursuing claims, Wells Fargo neglected its statutory and contractual obligations to certificate holders, including the five corporate credit unions," said NCUA Chair Debbie Matz. "This litigation is intended to hold Wells Fargo accountable for losses caused by that neglect."

The NCUA's complaint states the value of the securities depended on the quality of the pooled mortgage loans the trusts contained, and the bank, as trustee, had contractual and statutory duties to protect the interests of certificate holders.

The complaint states that, despite knowing about defects in the mortgage loans, Wells Fargo failed to provide required notices to certificate holders and other parties. It also failed to take timely action to force the repurchase, substitution or cure of defective mortgage loans or otherwise preserve trust remedies.

"We are gratified the agency continues to take efforts to lessen losses to credit unions. We have been encouraging NCUA to take all reasonable actions necessary to maximize recoveries from the institutions that were responsible for the events that contributed to the corporate failures," said Eric Richard, Credit Union National Association general counsel. "Ultimately, we are hopeful that credit unions will share in the fruits of these efforts when the liquidations of the corporates is complete and all funds owing to the Treasury have been repaid."

Five corporate credit unions--U.S Central, WesCorp, Members United, Southwest and Constitution--purchased approximately $2.4 billion in residential mortgage-backed securities issued from the trusts between 2004 and 2007.

Those securities were faulty and lost substantial value, contributing to the failure of all five corporates.

The NCUA's complaint seeks damages to be determined at trial. ReadMore

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Keep holidays merry, avoid being hacked with tips from CUNA

CU System
WASHINGTON (12/23/14)--To help consumers avoid fraud this holiday season, and every season, the Credit Union National Association released a list of helpful tips to keep their personal information out of the hands of criminals.
"With the immense number of data breaches that occurred at retailers in 2014, and a grim forecast for 2015, it's essential to arm consumers with tips they need to protect themselves," said CUNA President/CEO Jim Nussle. "Knowing how to protect yourself from hackers, and what to do if you get hacked, can help you keep your hard-earned money and give you peace of mind."
CUNA's contains a list of helpful ways for consumers to remain vigilant and protect their personal data when shopping in retail stores and online, including:
  • Don't respond to email, texts or telephone calls asking for personal or financial information;
  • Frequently review account activity and immediately report unauthorized transactions;
  • Place an initial fraud alert with credit bureaus if fraud has occurred;
  • Enroll and opt-in for transaction monitoring;
  • Use card on/off switches (if available); and
  • Enroll in Verified by VISA/MasterCard Secure Code.
In 2014 there have been more than 744 data security breaches, a 24.8% increase over 2013 which saw 596 breaches. In fact, a recent poll conducted by The Wall Street Journal and NBC News found that nearly half of all Americans have been notified by a credit card company, financial institution or retailer that their credit card information had possibly been stolen as part of a data breach.

Staples announced just last week that it has suffered a breach that affected 1.16 million customers. In the case of a data breach at a retailer such as Staples, credit unions are limited by law in disclosing many of the circumstances of the breach and often are not able to disclose the merchant responsible--yet the credit union is left to clean up the mess when a retail data breach occurs by informing its members of the breach, protecting their members from fraudulent charges and reissuing new credit and debit cards.
"Arming consumers with tips to protect themselves is helpful, but what's necessary to change the state of consumer protection is a change in policy," said Nussle. "Merchants are not subject to the same federal data protection standards as financial institutions, making them more susceptible to attacks.

"The best course of action to reduce data breaches would be for Congress to establish federal data-protection standards for retailers that are equal to financial institutions under the Gramm-Leach-Bliley Act," he said. ReadMore

CUs should be exempt from MLA proposal, says CUNA

WASHINGTON (12/23/14)--A revamped Military Lending Act (MLA) could negatively affect the delivery of high-quality, reasonably priced financial products to servicemembers, reads a joint letter from numerous credit union stakeholders, including the Credit Union National Association.

The Department of Defense (DOD) proposal would place a 36% cap on the military annual percentage rate (APR) of interest for credit products, as well as other protections.

"From our perspective as credit unions' advocates, any changes to the current rules should curtail and eliminate the unscrupulous business practices of organizations targeting our military personnel--and not harm credit unions that are dedicated to the financial well-being of their member-owners," reads the letter, which was also signed by the leaders of the African-American Credit Union Coalition, Defense Credit Union Council, National Association of Federal Credit Unions and the National Association of State Credit Union Supervisors.

The letter goes on to say that the services and products that have been cited as the need for the proposal are generally not offered by credit unions. None of the lenders mentioned in the proposal are credit unions.

This--along with the fact that credit unions face a number of other compliance burdens from the current MLA rule, the Dodd-Frank Act, the National Credit Union Administration, the Consumer Financial Protection Bureau (CFPB) and state regulators--is reason enough that credit unions should be exempt from the proposal.

"The credit union industry strongly urges DOD to exempt credit unions completely from the proposed changes, including new coverage under an expanded definition of 'consumer credit,' which would apply to certain open-end credit products. In this case, credit unions would remain covered by the existing MLA rule," the letter reads.

The letter also urges the DOD to work with the NCUA to ensure the agency's Payday Alternative Loans (PAL) product can continue to be offered, and are "properly excluded" from the proposal changes. NCUA Chair Debbie Matz wrote to the DOD last week with a similar request.

Credit unions support further efforts to educate servicemembers, the letter concludes, and the DOD is encouraged to collaborate with entities such as the CFPB. The letter pledges credit union assistance for financial education outreach at the national and local levels. ReadMore

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IOLTAs now fully insured by NCUA, Matz announces

ALEXANDRIA, Va. (12/23/14)--The federal credit union regulator has met President Barack Obama's signature of the Credit Union Share Insurance Fund Parity Act with encouragement, declaring that lawyers' trust accounts at federally insured credit unions are now insured to the limit by the Share Insurance Fund.

NCUA Chair Debbie Matz said the agency will make changes to its regulations to fully conform with the act.

"Credit unions now have parity with banks and, effective immediately, can fully insure lawyers' trust accounts up to $250,000 for each owner of the funds, which they could not do before," Matz said. "An attorney who is a member of the credit union where the trust account is opened now has a choice of financial institutions for that trust account. This enhances public confidence in both the banking and the credit union systems now that federal share and deposit insurance programs administered by NCUA and the [Federal Deposit Insurance Corp.] are the same."

Previously, interest on lawyer trust accounts (IOLTAs) could only be held at a credit union if each person involved with the account was a member of the credit union. According to the NCUA, this placed credit unions at a competitive disadvantage because it was impractical to require attorneys to establish multi-client lawyers' trust accounts in different credit unions to ensure full share insurance coverage.

The bill allows IOLTAs and similar accounts to be held at a credit union if either the administering attorney or the escrow agent is a member.

The passage of the bill has been lauded by credit unions, particularly as an avenue to welcome law firms and other businesses who traditionally could not establish a business relationship due to a credit union not being able to offer IOLTAs.

"I would like to thank President Obama for signing this into law and Rep. Ed Royce (R-Calif.) and Rep. Ed Perlmutter (D-Colo.) for their leadership," Matz said. "Sen. Angus King (I-Maine) and Sen. Mark Warner (D-Va.) played important roles moving this through the Senate. I am also pleased Congress adopted NCUA's recommendations regarding this legislation."

The Credit Union National Association was a longtime advocate for the bill, writing several letters urging 113th Congress to pass the bill before it adjourned and addressing the matter in a meeting with White House economic policy staff. ReadMore

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Holiday spirit strong with CUs' commitment to communities

CU System
MADISON, Wis. (12/23/14)--Credit unions are known for the "people-helping-people" philosophy that they live all year long. The holiday season is particularly imbued with a sense of giving as credit unions collect toys, distribute food and otherwise care for those in need.

Click for slideshow IBM Southeast Employees' FCU, Delray Beach, Fla., with $862 million in assets, hosted the 45th annual Christmas party for the Georgia Head Start Association. (IBM Southeast Employees' FCU Photo)
The efforts listed below are just a small representation of the many ways credit unions celebrate the season with giving.
  • For the third year in a row, $12 million-asset North East (Pa.) Welch FCU hosted a Project Love Angel Tree in its main office. More than 400 tags that had a child's name, clothing size and gift ideas were distributed as part of the project that brought donations from credit union employees and members alike (Life is a Highway Dec. 16);
  • Throughout the year, employees of Gulf Coast Educators FCU, Pasadena, Texas, with $517 million in assets, hold jeans days where those who donate $5 can dress in denim at work (Leaguer Dec. 8). The fund raised more than $7,500 overall, and staff allocated $3,500 to purchase toys this holiday season;
  • During December, Ocean Communities FCU, Biddeford, Maine, will collect new or gently used laptops and iPads for Grahamtastic Connection, a nonprofit that provides free technology to children with cancer and other serious illnesses ( Dec. 11). High school students from Sanford and Westbrook will refurbish the donated computers. The $154 million-asset credit union also donated $1,000, which will allow Grahamtastic Connection to purchase a new iPad and one year of Internet access for a local child;
  • FAA CU, Oklahoma City, with $563 million in assets, fulfilled the Christmas lists of 10 teens in the Youth Services for Oklahoma County's Supporting Kids in Independent Living (SKIL) program (Leaguer Dec. 9). President/CEO Steve Rasmussen said he is impressed with the staff's generosity each year. "They see the need, and they continue to open their hearts to these young adults facing issues no teen should have to face," he said. The SKIL program supports teens who are homeless through no fault of their own and who are dedicated to completing high school and furthering their education;
  • Peach State FCU, Lawrenceville, Ga., with $265 million in assets, collected Toys for Tots at each of its 12 branches. "Through our seven-county footprint, we were able to collect a truckload full of toys that will help make the holiday season a little brighter for less fortunate children in the community," said President/CEO Marshall Boutwell;
  • In Albany, N.Y., Colonie Senior Service Centers and Capital Communications FCU, with $1 billion in assets, will come together to help more than 200 seniors during the holiday. The program supports elderly individuals to maintain their independence and live safely on their own;
  • Icon CU, Boise, Idaho, with $169 million in assets, and Arsenal CU, Arnold, Mo., with $201 million in assets, focused on keeping people warm. Arsenal CU purchased and donated new hats, gloves and mittens. Icon CU is collecting socks for its fifth annual Warm Hearts, Toasty Toes drive, which has collected more than 7,000 pairs for local charities (Gem Dec. 1);
  • Four-legged friends aren't forgotten during the holiday season thanks to $6.5 billion-asset San Diego County CU. Its goal is to raise $10,000 by Dec. 31 for the San Diego Humane Society and Society for the Prevention of Cruelty to Animals (San Diego Union-Tribune Dec. 22); and
  • Who needs reindeer and a sleigh when you have a cargo bike? USAgencies CU, Portland, Ore., with $74 million in assets, collected more than 360 toys--five times its past amount--for the annual KGW Great Toy Drive. Once collected, the toys were loaded into Portland Pedal Power cargo bikes to be delivered in an eco-friendly, community-centric style (Anthem Dec. 19).

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Senators urge HUD's Castro to lower FHA loan fees

WASHINGTON (12/23/14)--Eighteen senators have written to U.S. Department of Housing and Urban Development Secretary Julian Castro asking for lower fees on Federal Housing Administration (FHA) loans.

The legislators cite the agency's most recent Mutual Mortgage Insurance Fund (MMIF) report, which shows the fund has seen a $21 billion improvement over the last two years, and is on target to meet the congressionally mandated 2% excess reserve by fiscal year 2016.

The improved outlook of the fund has led the legislators to believe that this is the right time to examine premium levels, saying appropriately priced fees may produce greater revenue and restore the capital ratio more quickly.

"While preserving the solid footing of the reserve fund is essential, reducing fees does not necessarily conflict with this goal," the letter reads. "As any business knows, just as a price that is set too high will lead to less profit, not more, lowering the premium on qualified borrowers may actually produce greater revenue and fully restore the capital ratio more quickly."

The FHA has increased the annual premium paid by borrowers for FHA guaranty by 145% since 2010, meaning a borrower taking out a $200,000 loan pays $1,600 more per year in fees.

According to the National Association of Realtors, these higher fees may have priced out as many as 375,000 potential homebuyers from buying a mortgage in 2013.

The letter was signed by Sens. Barbara Boxer (D-Calif.), Robert Menendez (D-N.J.), Charles Schumer (D-N.Y.), Jeff Merkley (D-Ore.), Elizabeth Warren (D-Mass.), Barbara Mikulski (D-Md.), Dianne Feinstein (D-Calif.), Patty Murray (D-Wash.), Richard Durbin (D-Ill.), Ben Cardin (D-Md.), Bernie Sanders (I-Vt.), Jeanne Shaheen (D-N.H.), Kirsten Gillibrand (D-N.Y.), Richard Blumenthal (D-Conn.), Chris Murphy (D-Conn.), Mazie Hirono (D-Hawaii), Edward Markey (D-Mass.) and Cory Booker (D-N.J.). ReadMore

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Okla. CU board approves 50% cut in 2015 assessments

CU System
FARMERS BRANCH, Texas (12/23/14)--The Oklahoma State Credit Union Board approved a 50% discount in assessments collected from Oklahoma state-chartered credit unions with assets of $100 million or less, and a 30% discount for those with more than $100 million in assets.
State Bank Commissioner Mick Thompson presented a proposed budget to the board that reflected how the department can continue its efficient operations even with the reduction in assessments, the Cornerstone Credit Union League reported (Leaguer Dec. 22). This is the third year in a row that the board approved reduced assessment rates for state-chartered credit unions. In 2012 and 2013, assessments were discounted by 15% and 10, respectively.
"These discounts are intended to reflect increased efficiencies that the department has achieved as well as a reduction in the regulatory burden on state-chartered credit unions," Thompson said. "The savings experienced by credit unions can be redirected toward service to their members."
Oklahoma Credit Union Association President Nate Webb said of the decision: "This is clearly good news for Oklahoma's state-chartered credit unions. I compliment Commissioner Thompson for working with credit unions in an effort to identify and reduce redundancies in the examination process. These efforts save our credit unions both time and money." ReadMore

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PCI council releases PIN security requirements

WAKEFIELD, Mass. (12/23/14)--The Payment Card Industry (PCI) Security Standards Council has released v2.0 of PIN Security Requirements.
The program contains a complete set of requirements for the secure management, processing and transmission of personal identification number (PIN) data at ATMs and attended and unattended point-of-sale (POS) terminals.
PCI PIN Security Requirements v2.0 aims to enhance usability and understanding by stating the requirements in a more granular manner, the council said.
The update includes incorporation of testing procedures into the requirements, which resulted in two versions of the document--PCI PIN Security Requirements v2.0 and PCI PIN Security Requirements and Test Procedures v2.0. The council said that including testing procedures in a separate version will facilitate a smoother evaluation and deeper understanding of the requirements.
The council also has published a summary of significant changes document that provides a high-level look at the modifications to the requirements.
Examples of common vulnerabilities for PIN theft addressed by the requirements include:
  • PINs that are not protected by use of a secure PIN block;
  • Failure to use approved cryptographic devices for PIN processing;
  • Cryptographic keys that are not random and not unique to each point of interaction device, and keys that never change;
  • Few, if any, documented PIN-protection procedures; and
  • Audit trails or logs that are not maintained.
"Criminals are actively targeting the point of sale and it's up to us as a community to stop them in their tracks," said Stephen W. Orfei, general manager of PCI Security Standards Council. "The requirements enhance the protection of devices that accept PINs with the end goal of securing cardholder data at the POS."

PIN Security Requirements is included in the current PIN Security Transaction security requirements. Program requirements and a list of approved devices are available for download. ReadMore

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CUNA offices closed through Friday, News Now returns Monday

CU System
WASHINGTON, D.C., and MADISON, Wis. (12/23/14)--The Washington, D.C., and Madison, Wis., offices of the Credit Union National Association will be closed Wednesday through Friday, reopening on Monday, Dec. 29.
News Now will not be published while the offices are closed, but it will be published Monday. ReadMore

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Don't get hacked during the holidays-use these tips from @CUNA #StoptheDataBreaches
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